Can South Africa Sustain Tourism Growth?

While South Africa’s 12.8% increase in the number of overnight tourists recorded during 2016 compared to those recorded during 2015 is laudable, further analysis of the data reveals there’s still significant work to be done to ensure long-term, sustainable and successful tourism growth. By Lee-Anne Bac.

Looking at Statistics South Africa’s release of Tourism and Migration findings for 2016, the 10.04 million overnight tourists that visited our country is certainly impressive and it’s a good step in the right direction. (See ‘SA Tourism Stats: Jan-Dec 2016’ here – Editor).

Of the 10 million overnight tourists, 2.5 million were from overseas and the balance, 7.5 million, came from Africa.The number of overseas tourists grew by an impressive 18% compared to 2015 while African arrivals, which comprises the lion’s share of tourists recorded during 2016, grew by 11%.

But these figures need to be reviewed in context so that a more realistic picture of South Africa’s performance in the tourism industry can be assessed.

It’s important to properly consider the decline of nearly 7% of overnight tourists which we recorded during 2015 compared to 2014, with overseas tourists down by nearly 5% during that year.

When analysing tourist arrivals to South Africa, the compound growth figures are very important.In reality, our nation’s compound growth in tourist arrivals over the past four years, between 2012 and 2016, is only 3.9% per annum, which is below the long-term worldwide average for international tourism arrivals which is between 4%-4.5%. Fortunately, our compound growth for overseas tourist arrivals during that same period is higher at 4.8%, but this is still regarded as a slow, pedestrian growth figure.

2016’s growth did well to ‘right-size’ the poor growth recorded in prior years when South Africa’s tourism sector was performing significantly below the global average.

The red flags in South Africa’s bumper 2016 year of tourism

The 2016 tourism data highlights that three of South Africa’s key target markets did not perform consistently over the course of the year.Influenced by the Brexit decision mid-year and by the Rand’s strength towards the end of the year, the United Kingdom, which is the country’s largest overseas source market, only grew by 9,9% for the year in 2016.

China – although achieving excellent growth overall for the year at 38%, in the last quarter this market was actually in decline (-2%). This was probably as a result of South Africa’s significant growth in the last quarter of 2015 which was difficult to match in the final three months of 2016.

Similarly, demand from India showed annual growth of nearly 22%, despite only recording a 7% growth in the last quarter of the 2016 year.

The key question when looking ahead is whether 18% growth in overseas tourist arrivals is sustainable, particularly now that our ZAR Currency has strengthened. When we look at the final two months of 2016, unfortunately, it doesn’t look like this rate of growth is going to be possible.

The tourism data highlights that overseas tourist arrivals only increased by 13% during November and by 11 % in December last year.

Evidence from last year’s data indicates that 2017 is unlikely to see significant growth in tourist arrivals and South Africa is likely to fall back to average levels of growth (around 4% to 5%).

However, there are alternative circumstances which may positively impact 2017’s tourism growth:

South Africa’s ZAR currency once again weakens against major global currencies; and/or

Competitive countries are no longer attractive as tourist destinations; and/or

Something truly dramatic and different is put into action in order to attract tourists to South Africa.

Only the third point above is within our own control. We need to invest in tourism, just like in any other industry, to make sure that the number of arrivals increase significantly and hence add real value to our citizen economy for the benefit of our people in the form of jobs and business activity.

About the author: Lee-Anne Bac is a Director at Advisory Services for Grant Thornton South Africa. www.gt.co.za

Definitions:

A tourist is defined as an overnight, foreign visitor, and excludes same-day travellers, transit travellers and work seekers.

When reference is made to a traveller, this would be foreign tourists PLUS same-day travellers, transit travellers and work seekers An overseas tourist is a visitor who is a citizen of a country outside of Africa.

An African tourist is a visitor to SA with citizenship of an African country

African Air-Arrival tourists are African tourists who enter SA via an airport (and not across land-borders).